Innovation, the new deal for Purchasing? Bearingpoint Sourcing 2012-2013 report


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Innovation, the new deal for Purchasing? Bearingpoint Sourcing 2012-2013 report

  1. 1. Innovation, the newdeal for Purchasing? 7th Sourcing Monitor | White paper | 2012-2013
  2. 2. Editorial 4 | Editorial
  3. 3. EditorialOctober 4, 2022, Hurricane corporation HQ Back in 2012: for most Purchasing directors, Yvon Donvalin Singapore. this vision of the Purchasing function’s role Partner may appear somewhat vague ten years from BearingPointIn response to the growth of the aerospace now. However, it defines the new outlines ofmarket in Southeast Asia the Comex makes the function and its positioning at the very Patrice Pourchetthe strategic decision to launch a program center of the extended supply chain. This Academic Directornamed "Capacity, Innovation & Suppliers years topic has proved to be particularly ESSECInitiative (C2IS)" able to manage a set of representative of today’s Purchasing directors“work packages” on a regional scale. concerns. The increased competition and the Christophe Excoffier uncertain economic environment have placed ChairmanThis initiative was designed as a strategic Innovation at the heart of every European Novamétriedevelopment around key stakeholders companys growth strategy. How is Purchasingincluding historical tier 1 and tier 2 contributing? In a crisis environment wheresuppliers. It has been developed since the function is asked to reduce costs and meet2012 when Hurricane decided to settle objectives within tight deadlines, almost 2/3 ofin Southeast Asia to support the market Purchasing directors in the panel continue todemand. Potential suppliers were identified focus on Innovation.and pre-selected by Hurricane businessunits around the world. The study shows that the contribution of the Purchasing function to Innovation dependsSonya P.L., corporate manager BoD (Buyer on its integration in the companys Innovationon Demand) based in Bangalore, India, process. It appears to be a measure and ais one of the managers in charge of the trigger of the functions alignment with theprogram. She has an extensive knowledge company’s Innovation strategy.of local suppliers as she spent one yearat one of them, implementing SAM-2 Departments in charge of Innovation in theprocesses (Supplier Asset Management). company such as R&D and Marketing, haveShe leads the Supply Chain Design traditionally worked in a closed environment.e-workshop with all the stakeholders of the The need to associate other functions toextended company landscape: Hurricane the Innovation process is also a challengeinternal customers, business unit buyers for them. How to further increase theand representatives of suppliers and integration with internal clients? How to boostcustomers. Innovation at the supplier level? What skills to bridge between the internal and externalBased on linkin-BoD-3.0 technology, Sonya environments? How to prepare PurchasingP.L. states that the C2IS network enables function to meet the challenges ahead?to define and share the strategic vision,its potential economic impact in terms ofproductivity and value creation and itsimplementation schedule, thus ramping upthe operations. 5
  4. 4. Executive Summary Looking for a new deal through Innovation The Purchasing function, going beyond the basics Stable resources, limited ambition? The 2012 results show an overall stagnation in Purchasing operating budget for 44% of the companies interviewed. Trends differ from one region to another: total budget increases for 63% of the Russian companies in the panel while it stagnates for 57% of the French companies. The "specialisation" of the Purchasing function seems to have reached its equilibrium: the Purchasing team distribution pattern of 2/3 specialist to 1/3 generalist appears year after year except in the UK and Ireland where professional organisations certify Purchasing professionals. Purchasing priorities, back to basics? Improving the top line for organisations in these times is complex and riddled with unpredictability. However, Purchasing can still have a significant impact on the bottom line because this is in its circle of influence. In this context, Purchasing is being asked to go back to basics: reducing costs, developing supplier relationship, improving services and monitoring risks are the expected priorities. Innovation, an emerging priority for Purchasing? «Contribution to Innovation» ranks only 9th among the priorities of Purchasing directors even though 57% of them evolve in a market driven by Innovation. However, the special attention they are paying to the control of risk and to supplier management dimensions (the latter went up 17 points from 2010 to 2012) would help improving their contribution to Innovation in the coming years.6 | Executive Summary
  5. 5. Innovation, a must in an uncertain environmentWhat is Innovation? When Purchasing directors use InnovationAccording to Purchasing directors, Innovation Contributing to Innovation requires anembraces four main dimensions: investment from Purchasing directors in• New process, product or service; terms of resources. An investment that may• Contribution to competitive advantage; be disregarded due to current constraints on• Anticipation of trends; operational budget.• A state of mind. Paradoxically enough, results show that 63% ofAs a result, they think of Innovation as a lever Purchasing directors continue to concentrate 57%to meet their objectives and a way to support efforts on Innovation to achieve their growth and development. For those Purchasing directors, the current constrained economic environment represents CompaniesWhere Innovation fits for general an opportunity to explore and to prove their evolving inmanagement ability to contribute to Innovation. a marketFaced with this market pressure and current According to the study, Germany, UK and impacted byeconomic climate, Innovation becomes a Ireland are adopting a conservative position Innovationmajor challenge for companies and 92% of while Scandinavian companies are clearlygeneral management place Innovation within proactive in this current economic climate.their top 5 priorities. Results per industrial sector show that industryThis «urge» for Innovation is relayed all along and non-financial services sectors are clearlythe value chain, from the Purchasing functions looking for differentiation to deal with the crisisinternal clients to suppliers. and boost Innovation consequently. 7
  6. 6. Innovation, a key enabler of integration with the business Which organisation to support Innovation? exposure of the company to Innovation and on The Innovation process requires close internal the integration of the Purchasing function to and cross-functional collaboration. 54% of business. companies have a clearly identified structure leading Innovation. Furthermore the study The contribution of the Purchasing function to shows that there are three main models for Innovation is particularly strong when there is how Innovation is led: an alignment of the Purchasing strategy with • A single department; the companys Innovation strategy. • A transversal activity; • n atomised organisation between multiple A Reaching the right balance functions. Depending on the dimension to improve, two different solutions exist and can be combined: The Purchasing functions knowledge of the • ddressing low contribution of Purchasing A supply market, its vision of future trends to the Innovation process requires a and suppliers innovative solutions and its transformation of the Purchasing function transversal position are assets to share with the itself: broaden its scope in terms of services Innovation actors. and coverage to better contribute to company goals and prevent the risk of The Purchasing Innovation Integration restricting the function to a transactional (P2I) model approach; Our study shows that when dealing with • ddressing low maturity of the Innovation A Innovation, Purchasing departments can be process requires developping the Purchasing categorised in five classes: functions ability to influence the Innovation 1. The Inactive; strategy of the company. 2. The Learners; 3. The Legalists; In any case it calls for a change of mindset 4. The Opportunists; of all stakeholders to see Innovation as a 5. The Visionaries. Purchasing performance lever. We have seen through these five classes that contribution of the Purchasing function to Innovation depends highly on the level of Competitive advantage as a key driver for delivering 46% Innovation8 | Executive Summary
  7. 7. Innovation, an opportunity to reinforce the PurchasinginfluenceChoose your battlefields Shake up supplier relationship management: Japan, our guest starToday most companies are driving cross- over a third of responding companies identified The exposure of Japanesefunctional initiatives, creating the opportunity “mastering supplier relationships” as the companies to Innovation isfor the Purchasing function to adopt an main area of improvement that would lead to considerably higher than thatinnovative approach. Purchasing directors can Innovation within the Purchasing function. of European companies.leverage those opportunities through three However, the integration ofcategories of issues: Put the flash light on your initiatives: the Purchasing function in• isk and regulation; R measuring and communicating the value the Innovation process of the• perational excellence; O created by the Purchasing function to the company is still in its early• Differentiation. Innovation process is a key lever for Purchasing stage of maturity. directors to consolidate their legitimacy and The current economicThroughout Europe, all Purchasing directors got expand their influence internally with other environment is bringingto the same conclusion: improving Innovation departments. a renewed focus on theis closely linked to mastering supplier role of this function. Thererelationships and being able to influence the Shift to a new state of mind is an opportunity in theorganisation’s product and service roadmaps. The capacity of a company to innovate years ahead for Japanese depends on its own capabilities, its behaviour Purchasing departmentsOften the biggest challenge for Purchasing and the way it reacts to its environment. In to play a larger part in thedirectors is to realise their potential as part of a fact, Innovation involves the ability to connect innovative roadmap.wider enterprise and then launch initiatives to the people with ideas or solutions to the onesmove forward. facing risks or problems.Define your roadmap Purchasing function must play its roleCreate the buzz by thinking “out of the box”: and become a project manager to ensurestandardising the Purchasing process can act Innovation becomes part of the functionsas a hindrance to Innovation by reducing the objectives. This requires from buyers projectincentives for new concepts and tools. management skills and moreover the ability to drive change in attitude and mindset.Set up a two-way street with internal clients: inorder to overcome the lack of integration with Are Purchasing directors ready to embrace thisother functions, buyers need to further develop innovative transformation? According to ourtheir soft skills to ally recognised market research, 82% of Purchasing directors agree.knowledge with the ability to drive change.The conquest of Innovation initiates the emergence ofPurchasing 3.0 Companies as a whole reflect this uncertainty management and transform information soon trends and developments for the coming that it gives an edge over competition using anyears and are looking for innovative ways to IT platform that is easily adaptable.create value as growth drivers in their marketsand for their customers. The basis for this new resource shared by the company, the suppliers and its customers willThe drivers of tomorrows Purchasing be a driver for sustainable growth. A new typestakeholders will be to produce and build on of Purchasing service will be created: the buyerknowledge, organise capability management, on-demand.make actions meaningful, innovate in 9
  8. 8. AppendixSourcing Monitor history ambitious role is emerging; that of business partner. Finding and managing the scarceThe Sourcing Monitor, founded in 2004 by resources with the high skills required toBearingPoint, Microsoft, Essec and Novamétrie, meet rising standards is becoming the mainpresents its seventh edition of state-of-the-art challenge for Purchasing directors.practices, organisation and trends within thePurchasing function in Europe. The goal is to The sixth edition leads us to wonder whetherprovide leadership viewpoints regarding the sustainable Purchasing is a myth or a reality,evolving Purchasing function on an annual and whether the challenges of performancebasis. and excellence above are consistent with the growing importance of business ethics. ForOur first edition in 2004 illustrated the ramping the first time, the introduction of a Europeanup of the Purchasing function in the 90’s. The survey pointed out the different behaviorssurvey underlined the areas of progress linked deployed to achieve compliance within particular with the improvement of methods sustainable Purchasing.and skills, and the ability of the Purchasingfunction to place itself upstream in the This seventh edition of the Monitor focusesdefinition of functional and technical needs. It on the companys perceptions, initiatives andidentified supplier relationship management as assessment of the maturity of the contributiona promising area for development. of the Purchasing function to Innovation. It also explores the areas of improvement andOur second survey confirmed the profound the next steps to operate the transformation ofevolution of the Purchasing function in relation the Purchasing functions state of mind towardto its origins and the new areas it had moved breakthrough Innovation.into. The study highlighted prospects forhuman resources and the functions interactionwith executive management. Scope of the study The study was conducted across a numberIn the third survey, the study was conducted of European countries including France,on the dynamics of the relationship between the United Kingdom, Ireland, Germany,general management and the Purchasing Austria, Switzerland, Finland, Norway,department. The executive managers Denmark, Sweden, Belgium, the Netherlands,interviewed stated their expectations in terms Luxembourg and Russia. An overview of Japanof cost control and competitiveness, though is also given in the study.they were not aware of the full potential thefunction may create for the business. Methodology This study was conducted between JanuaryThe fourth studys main findings revealed that and June 2012 in two phases:Purchasing directors are still too often set on • quantitative study: 401 telephone Aa medium-term approach. Yet there was a interviews with Purchasing directors, basedneed for even more higher-level skills. Better on a questionnaire;knowledge of the market and the handling of • qualitative study: over 55 face-to-face Aeven more complex Purchasing issues gave interviews with Purchasing directors inpride of place to skill allocation and high different countries gaining insight into theirpotential for managing resources. It concluded perspectives.that the Purchasing functions trend wasmoving away from the status of cost killer and Final analysis and conclusions of the study aretowards operational player. based on both quantitative and qualitative data.The fifth edition confirmed the previouslyidentified trends. The role of Purchasing has The five classes presented in the study areevolved. By working more closely with its in- taken from the Multiple Correspondencehouse customers, Purchasing has repositioned Analysis (MCA), a data analysis technique toitself as a source of new ideas which add value detect underlying structures in a data set. Theon a cross functional basis. A new and more50 | Appendix
  9. 9. categories are the result of factor analysis and Panelthen classification of active variables. The panel brings together 400 European Average results presented companies and over 15 Japanese companies. in the study are based onProspective Committee the European panel ofAs in previous surveys, the 2012 Sourcing Special attention was paid to provide a balance 401 companies. JapansMonitor was guided by the Prospective between different industry segments and results have been treatedCommittee. This Committee has three primary turnover in order to ensure that the results separately.roles: to set the study topics, to react to initial would be representative.results and to interpret the results. Germany, Switzerland and Austria Denmark, Finland, Norway and Sweden United Kingdom and Ireland 10% 10% 10% 10% 10% 50%Sector Turnover (M€) 9% 7% 20% 30% 16% 62% 6% 32% 18% Industry Financial services Non financial Distribution Less than 500 From 1,000 to services 10,000 Public sector From 500 to 1,000 More than 10,000Source: BearingPoint, Essec, Novametrie study - 2012 51
  10. 10. AcknowledgementsWe would like to convey our sincere thanks and gratitude to all those who havecontribute to this study.Thanks to all the companies that have participated to this survey, and especiallyto the fifty Purchasing directors who agreed to meet us and give up their precioustime. Their thoughts and experiences have added valuable substance to thissurvey.Thanks to the members of the Prospective Committee, for their guidance allalong the study:• Julien BARTHELEMY, Procurement Group Manager - Microsoft• Jean BOUVEROT, Purchasing Responsible - Department of Defense• Sylvain FRESNAULT, Purchasing director of Courier - La Poste• Christian GALICHON, Purchasing director - LVMH• Christian JOUAN, Purchasing Manager - Bic Group, and President of Adra• Régine LUCAS, Group Procurement Senior Vice President - Axa• Arnaud MINVIELLE, General director - BPCE Purchasing• Patrice POURCHET, Academic director MS GAI - Essec Business School• Isabelle QUETTIER, Purchasing VP - Suez Environnement• Laurence ROLLES, Purchasing director - 3M• Sylvain ROUSSEAU, VP Purchasing and Supply Chain - DCNS• Thierry du VILLARD, VP Purchasing and Supply Chain - Jarden Group EMEAWe would also like to convey our sincere thanks and gratitude to the ADRA(Association des Directeurs et Responsables Achats) and its President, ChristianJouan, for their support all along these years.Special thanks to Petr Solomatin (Russia), Simon Clark (United Kingdom), MyTegelgard (Sweden) and Osamu Uehara (Japan) for their active contribution.And finally, we would like to thank the Sourcing Monitor team for their daily workon this Monitor edition: Livia Gonzalez, Stephanie Lesdos and Arnaud Lethrosne.52 | Appendix
  11. 11. PartnersWe deliver Business Consulting. We are an independent firm with Europeanroots and a global reach. In today’s world, we think that Expertise is not enough.Driven by a strong entrepreneurial mindset and desire to create long termpartnerships, our 3,200 Consultants are committed to creating greater clientvalue, from strategy through to implementation, delivering tangible results.As our clients’ trusted advisor for many years (60% of Eurostoxx 50’ and majorpublic organizations), we define where to go and how to get there…To get there. Together.For more information: @BearingPointArgentina | Australia | Austria | Belgium | Brazil | Canada | Chile | China | Denmark | Finland | France |Germany | Ireland | Italy | Japan | Korea | Malaysia | Morocco | Netherlands | New Zealand | Norway |Poland | Portugal | Romania | Russia | Singapore | Spain | Sweden | Switzerland | Taiwan | Thailand | UnitedKingdom | United States | Emerging Markets in AfricaThe ESSEC group, École Supérieure des Sciences Économiques et Commerciales,founded in 1907, is a major world player in management training. Teaching is byinternationally recognised research professors and renowned business leaders.Together, they carry on the tradition of academic excellence, promote individualcreativity and build character and the spirit of group openness in the service ofeconomic and social activities.For more information: www.essec.comNOVAMETRIE is an institute specialising in strategic studies for opinion leaders.The institute offers globalised and holistic interdisciplinary methodologies,integrating the quantitative aspect and the qualitative approach. TheNovametrie Scientific Committee, composed of academics and experts, offers aninnovative operational and strategic vision, from designingresearch to effective recommendations.For more information: 53
  12. 12. Contacts 54 | Contacts
  13. 13. ContactsEssec NovamétriePatrice Pourchet Christophe ExcoffierAcademic director Chairman+33 1 34 43 32 57 +33 1 44 43 54 c-excoffier@novametrie.comBearingPointYvon Donval Charles de MonchyPartner - France and Belgium Partner - Netherlands+33 6 10 84 38 51 +31 20 504 charles.demonchy@bearingpoint.comStephen Coy Claudia CarrUnited Kingdom Ireland+44 203 206 9655 +353 1 418 claudia.carr@bearingpoint.comPatrick Palmgren Riku SantalaPartner - Denmark, Norway and Sweden Partner - Finland+46 733 211 639 +358 40 532 riku.santala@bearingpoint.comMatthias Loebich Ralf DillmannPartner - Austria, Germany and Switzerland Director - Austria, Germany and Switzerland+49 89 54033 6126 +49 69 13022 ralf.dillmann@bearingpoint.comJean-Michel Huet Sergey KuzovkinDirector - Emerging Markets Partner - Russia+33 621 72 78 44 +7 495 937 55
  14. 14. @BearingPoint